ISBN: 3540006567
TITLE: Information Dissemination in Currency Crises
AUTHOR: Metz
TOC:

Introduction 1
Part I The Classical Currency Crisis Models
1 First-Generation Model - Krugman (1979) 9
1.1 The Classical First-Generation Model by Krugman (1979) 10
1.2 Modifications of the First-Generation Model 14
1.2.1 Sterilizing Money-Supply Effects 14
1.2.2 Sterilization and Risk Premia 15
1.2.3 Assuming Uncertainties 16
2 Second-Generation Model - Obstfeld (1994) 19
2.1 The Classical Second-Generation Model by Obstfeld (1994) 20
2.2 Empirical Tests 25
Part II Self-Fulfilling Currency Crisis Model with Unique Equilibrium - Morris and Shin (1998)
3 Introduction 29
4 Game-Theoretic Preliminaries 33
4.1 Games, Strategies and Information 33
4.2 Solving Coordination Games 39
4.3 Equilibrium Selection in Global Games - Carlsson and van Damme (1993) 44
4.4 Generalizing the Method to n-Player, 2-Action Games 49
5 Solving Currency Crisis Models in Global Games - The Morris/Shin-Model (1998) 53
5.1 The Basic Model by Morris and Shin (1998) 54
5.2 Interpretation of the Results 60
6 Transparency and Expectation Formation in the Basic Morris/Shin-Model (1998) 63
6.1 Transparency 63
6.2 Expectation Formation 66
Part III The Influence of Private and Public Information in Self-Fulfilling Currency Crisis Models
7 Introduction 73
8 Characterization of Private and Public Information 77
9 The Currency Crisis Model with Private and Public Information 81
9.1 The Structure of the Model 81
9.2 The Complete Information Case - Multiple Equilibria 83
9.3 Incomplete Public Information - Multiple Equilibria versus Unique Equilibrium 84
9.4 Incomplete Public and Private Information - Unique Equilibrium 87
9.4.1 Derivation of the Unique Equilibrium 88
9.4.2 The Uniqueness Condition 93
9.5 Comparative Statics 94
9.6 Unique versus Multiple Equilibria and the Importance of Private and Public Information 106
9.7 Conclusion 107
10 Optimal Information Policy - Endogenizing Information Precision 113
10.1 The Model 115
10.2 Optimal Risk Taking and Information Policy 116
10.3 Conclusion 129
Part IV Informational Aspects of Speculators' Size and Dynamics
11 Introduction 135
12 Currency Crisis Models with Small and Large Traders 137
12.1 The Basic Model with Small and Large Traders - Corsetti, Dasgupta, Morris and Shin (2001) 139
12.2 Simplified Model 147
12.2.1 The Derivation of Equilibrium 148
12.2.2 Comparative Statics 153
12.3 Conclusion 159
13 Informational Cascades and Herds: Aspects of Dynamics and Time 163
13.1 Herding Behavior and Informational Cascades 164
13.1.1 The Model by Banerjee (1993) 164
13.1.2 The Model by Bikhchandani, Hirshleifer and Welch (1992) 168
13.2 Currency Crises as Dynamic Coordination Games - Dasgupta (2001) 171
13.2.1 The Static Benchmark Case 172
13.2.2 Dynamic Game with Exogenous Order 174
13.2.3 Dynamic Game with Endogenous Order 178
13.3 Large Traders in Dynamic Coordination Games 181
Part V Testing the Theoretical Results
14 Introduction 189
15 Experimental Evidence 193
16 Empirical Evidence 199
16.1 The Asian Crisis 1997-98 - Empirical Tests by Prati and Sbracia (2001) 199
16.2 The Mexican Peso Crisis 1994-95 - Descriptive Evidence 207
16.2.1 The Venue of the Mexican Crisis 207
16.2.2 Combining the Observations with Theoretical Results 213
Part VI Concluding Thoughts
References 225
END
